OKPOLICY.ORG
Original at http://www.businessweek.com/ap/financialnews/D9MJ20Q00.htm
By Tim Talley, Associated Press
A research group that studies state policy issues said Wednesday budget writers should consider closing income tax loopholes, eliminating some sales tax exemptions and tapping non-appropriated state revenue to prevent potentially drastic budget cuts to state-funded education, health care and law enforcement services.
The Oklahoma Policy Institute said funding for public services has declined over the past two years due to the economic downturn and low energy prices and that more than half of all state agencies have absorbed funding cuts of 15 percent or more. Deeper cuts could harm seniors and persons with disabilities and mental illness who rely on state services.
“We’re concerned about the severity of the cuts that we’re facing,” said David Blatt, director of the Tulsa-based think tank. “We’re genuinely alarmed by what another round of deep cuts will do.”
Facing a $500 million budget hole for the fiscal year that begins July 1, Gov. Mary Fallin has proposed another round of budget cuts that would trim the budgets of most agencies about 5 percent while holding cuts to core services like education, health care and public safety to around 3 percent.
But Blatt said lawmakers should not rely on spending cuts alone when writing the state budget and should look for potential sources of untapped revenue to avoid steep cuts.
“We know that none of these options will be politically easy to adopt,” Blatt said. “But compared to the real harm that steep cuts would inflict on Oklahoma, they deserve serious consideration in the remaining weeks of the legislative session.” The Legislature is constitutionally required to adjourn by May 27.
The institute’s recommendations include freezing the trigger on an income tax cut that would lower the state’s top rate from 5.5 percent to 5.25 percent when state revenue grows by at least 4 percent. Revenue projections indicate the state will meet the revenue growth trigger this year, allowing the income tax cut to take effect on Jan. 1.
Fallin has said she favors the tax cut, which would reduce state revenue by about $120 million in 2012. But Blatt said it is rash to cut taxes at a time of declining revenue and budget cuts.
“It just doesn’t make sense,” Blatt said. “It’s an especially unfortunate time.”
State lawmakers approved the tax cut trigger in 2007 before the nationwide economic recession began. Although state revenue collections are improving, year-to-date collections for the fiscal year that ends June 30 remain 15 percent below total collections through March 2008 before the recession began to affect Oklahoma, according to the Office of State Finance.
“This decision was made in very different economic times,” Blatt said. “Let’s wait until revenues have really recovered.”
The think tank recommended tapping non-appropriated state revenue stored in various revolving funds with balances that exceed $1.2 billion. It said some of the funds could substitute for state-appropriated money in next year’s budget or be transferred to the general revenue fund.
It also recommended appropriating some or all of the collections that exceed this year’s revenue projections, tax revenue that has traditionally been saved for appropriation in the following year. Blatt said revenue collections are projected to exceed projections by about $244 million this year.
“Given the alternative, it makes sense,” he said.
Blatt said the policy institute delivered its recommendations to Fallin’s office Wednesday morning. Fallin’s press secretary, Aaron Cooper, said the governor and her staff are studying the proposals.
